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[27 comments]

BrainTrust Query: Self-Checkout - What Should Drive the Retailer Decision?

April 25, 2012

The self-checkout continues to be the subject of fierce debate within the retail community. The controversy is propelled by the multiple dimensions of the issue to retailers, manufacturers and shoppers.

Studies conducted by Dechert-Hampe show that self-checkouts are now found in two-thirds of all supermarkets in the U.S. and represent a fourth of all checkout lanes. An estimated 25 to 33 percent of all supermarket transactions now are via self-checkout. They can also be found in an increasing number of other store formats including drug stores, c-stores, mass merchants, hardware and office supply.

The self-checkout has arrived and while there are still issues to be addressed with the technology, the basic concept has gained wide acceptance. Furthermore, in-store interviews confirm that a large segment of shoppers have embraced self checkout technology based on its convenience and speed. Many shoppers prefer it, finding it particularly useful for small baskets.

The impetus for self-checkouts was originally driven by the retailer operations groups who saw the opportunity to employ technology to cut costs and improve efficiency of the checkout. However, many retailers report that actual labor savings were "soft" and ROI disappointing.

In addition, operational issues such as weight checks and shrinkage continue to be a concern for many retailers. ABC and USA Today recently ran stories on the "crime wave" at the self-checkout. This has caused a minor panic and spawned more interest in technology for loss prevention.

Unfortunately, merchandising solutions for the self-checkout have lagged behind the technology. Studies show that consumers are less likely to shop for impulse items at the self-checkout. Coupled with poor merchandising approaches, this has resulted in a significant blow to the impulse sales at checkout.

Albertsons and Big Y have both announced that, after due consideration, they are abandoning the self-checkout. They attribute this action primarily to the failure of the self checkout technology to provide the exceptional customer service they seek and the resulting impact on the customer relationship.

On the other hand, Walmart has announced they are expanding self-checkouts in pursuit of greater savings and lower prices. Stop & Shop has also announced plans for expansion of their SCAN IT! checkout system in both the handheld format and the mobile application.

Retailers have started to recognize the need to offer a variety of transaction choices to the shopper consistent with their preferences. Ultimately, they will have to compete in the marketplace based not only on their products and prices, but also on the transactional choices they offer. It is a complex decision, with a major impact on both financial results and the nature of the customer relationship.

Discussion Questions:

Discussion Questions: Do you believe self-checkouts undermine or support exceptional customer service? What solution(s) do you see to the loss of impulse purchases due to their increased use? How do you see mobile technology affecting the future of self-checkout?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Which dimension is most critical to retailer decisions relative to the adoption of self-checkout technology?

Comments:

Isn't great customer service treating the customer in the manner they want? Those retailers who offer both self-checkout and the traditional cashier lanes are offering the customers the ability to choose how they want to handle the payment process. Isn't that good customer service?

I much prefer the self-checkout (especially for small orders) rather than waiting behind people who don't seem to be able to empty their basket, find their checkbook, etc. I believe some of the impulse sale generated in the traditional lanes is because it takes so much time and customers then spend it looking at the various items.

I agree that many of the self-checkout lanes do not offer the same type of impulse opportunities as do the regular lanes (or the waiting time). The question is that the fault of the technology or the layout being used?

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Steve Montgomery, President, b2b Solutions, LLC

To the extent that the systems work, work well, and their is support immediately available when needed (for alcohol and tobacco, for example, where IDs need to be checked), I love it. It gives me, the shopper, the choice. My Kroger has recently tested a candy and a sweet baked goods (think Hostess) free standing rack by their four self-checkouts -- that should help the problem of impulse items. Maybe a new design is needed for these areas instead of the traditional racks for candy and magazines.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

The first question to ask yourself is did I have exceptional customer service before I added self-checkout? Be honest! Just because you have a human being there doesn't automatically suggest that you have exceptional customer service. Based upon the research presented, it seems that there are customers who believe self-checkout is customer service.

The push for self-checkout was about reducing headcount to manage costs. Self checkout can be a great service if you balance that with exceptional customer service with engaged employees at other shopper touchpoints in the store. It is about developing and defining your brand not the technology. Technology and how it enables your overall brand experience for your shoppers is what matters.

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

Self-Checkouts ARE a form of good customer service. Many consumers prefer to get in, and get out, and they actually prefer self-check stands as a major convenience. The real issue is that retailers need to improve the technology so that customers are less apt to rip them off by leaving items in the basket, or by keying in codes for generic cucumbers when in fact they are buying lobster.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

The high level of consumer acceptance indicates that supermarket retailers cannot easily or safely walk away from self-checkout, Albertsons and Big Y notwithstanding. And if Walmart is expanding self-checkout....

A recent RetailWire post addressed the shrink issue and posited a technology solution. One of the issues in this post is merchandising, and perhaps the solution is management. It would seem, with the expansion of self-checkouts, that the time has come for making the front end a separate category with its own category management team. By uniting front-end checkout merchandising into a single category will facilitate the thinking and innovation necessary to merchandise more effectively the self-checkout lanes. Shoppers still have to wait, serviced or self-service checkouts, so there has be a way to sell them something. The right management will unlock the secrets to making self-checkout a more profitable and effective for grocery retailers.

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Roy White, Editor-at-large, RetailWire

Self checkout isn't about undermining or supporting customer service -- it is about customer CHOICE. Let the customer decide how they want to interact.

The impulse items I've seen at self checkout just lack good merchandising technique. The retailer didn't have a standard checkstand so it was a band aid approach to displaying the impulse items.

Self checkout will evolve to smartphone devices where consumers scan as they go, then sync with POS and leave the store.

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

Not every supermarket is concerned about exceptional customer service. Stores that want to put approachable people at the checkout will pay the extra money needed to do that. If stores have undesirable or less approachable cashiers, where a self checkout is the better solution for the customer, then those stores will have self checkouts. Each supermarket chain is making the decision that works best for them. Walmart is finding that a younger generation of customers have figured out how to use the self checkout. Obviously they can't put them in the high crime areas.

Naturally there will be a loss in impulse items. That is just one of the tradeoffs. Retailers are faced with a labor shortage due to a robust economy. It's very hard to find good looking, qualified, and approachable cashiers unless you pay them a premium wage.

David Livingston, Principal, DJL Research

Stationary (not mobile/handheld) Self Checkout (SCO) certainly enhances customer service in that is offers more choice and control of the shopping experience. It is definitely advantageous to the retailer operational efficiency, also. This has been proved over decades of studies.

I also believe there need not be any compromise in impulse purchase opportunities. There are plenty of fixture options available to entice upselling during the SCO process.

A few grocery retailers have been experimenting with mobile checkout for more than 20 years, however I believe the shopper would rather utilize their own device first of all, and then the retailer has to provide a compelling application that is intuitive and effective to use for the shopper. That has proved to be difficult to achieve. Of course in formats other than grocery, retailers have made great progress, whether it's Apple Stores with employees using the technology, or Container Stores with the shopper handhelds.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Self-checkout IS exceptional customer service!!!

I regularly go to Home Depot and CVS, both with self-checkout and most often find customers choosing self-checkout over the manned lanes. I have given examples from Home Depot regularly on these discussions. The latest from Saturday again reinforces the self-checkout preference. HD had five cashiers available. Two customers were using their lanes. Four customers were using self-checkout and one was waiting to use self-checkout. Send the cashiers home, save the money.

Strange, why was one waiting when he could have gone to the manned lane? But, it indicates there is something more to self-checkout than just speed.

If what I have seen is so and self-checkout is exceptional customer service, then give up the impulse purchases because the customer will eventually gravitate to somebody's self check-out at another store.

Mobile technology? It only makes it faster and better!

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Gene Detroyer, Professor, Independent

To answer the questions presented, the current monster self-checkout machines undermine exceptional customer service. These big machines appear to do nothing more but replace a human cashier; in my opinion, to cut costs.

In the next 36 months, I expect these current machines to find their way in the same dump pile as the large punch key machines as obsolete pieces of equipment. I believe most of the self-checkout conversations revolve around these machines and their limitation instead of the actual self-checkout science.

The opportunities/issues with self-checkout I identified are:

- All products have to be bar-coded/scanned at item-level, not UPC level for better accountability. Real time data need to show when the item left the shelf and what cart/basket the item is in. This not only reduce shrinkage, but a recommendation capability can occur in real time based on items in a cart.

- Self-checkout will have to interact with mobile phones. Not only with loyalty cards, but the ability to send a receipt electronically to the mobile phone, retrieve a customized shopping list from the mobile phone and send text message/Bluetooth impulse offers to customers waiting for the next open self-checkout station.

Ed Dunn, Founder, (Stealth Operation)

When done right, self-checkout is a great idea, and positive to consumers. Unfortunately, most of the self-checkout systems I have come across are woefully poor, not user-friendly or intuitive in any way. In most cases, store staff have to come over to assist. I'm in the retail business, and use technology constantly in my business and personal life, and I am amazed how many times the system I am using at stores needs help and prompting from store staff. I don't think any of us confuse convenience with self-checkout. Store staff must continue to be available and helpful, regardless if they offer self-checkouts. And self-checkouts need to be easy to use, fuss-free, or we consumers will continue to ignore them. I see an opportunity for technology to step up and make a difference here.

Donna Brockway, President, FutureRetail

Like beauty, exceptional customer service is in the eyes of the beholder. Retailing is expanding from a service business to a broader self-service business in much the same manner as have gasoline stations. If you're always in a hurry, you appreciate self-checkouts. If you appreciate attention, or want some human contact, you want someone to you serve you.

The loss of impulse sales is a challenge for retailers to find new methods to compensate for such losses. Lamenting about such losses is not an answer.

Mobile technology will affect the future of self-checkout, to a large degree, in direct relation to what tomorrow's emerging customers want the most: fast non-contact store departures or human mingling ... and it seems we are gradually moving toward the former.

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Gene Hoffman, President/CEO, Corporate Strategies International

I use self-checkout frequently and have seen a greater number of people in the last year using them, causing lines at peak traffic hours. Only gripe is when people try to self-check with produce!!!

'OscarSmith'

First of all, let me start with a bit of cynicism. There are very few retailers and particularly supermarket retailers who can truly claim to offer "exceptional checkout customer service." Thus, using the preservation of this level of service as an excuse not to offer self-checkout seems a bit disingenuous to me. But for those that are truly committed to maintaining consistent, efficient and quality customer contact at the checkout, I understand their aversion to self-checkout.

On the other hand, shoppers are becoming increasing comfortable with "checking themselves out" given their adaption to self-checkout and mobile technology will do nothing but increase the desire of these shoppers to pay in the quickest, most efficient way possible. In many cases, this means little or no personal contact with the cashier is necessary. Good marketing means embracing emerging consumer trends, not competing with them.

As far as the loss of impulse buying at the checkout, if the retailer is that dependent upon these sales to make their model work, they likely are missing other opportunities for cross merchandising in other areas of the store. In short, give these self-checkout shoppers what they want which is an efficient and easy process and know that their repeat business will more than offset any lost impulse sales at the checkout.

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Mark Heckman, Principal, Mark Heckman Consulting

How can exceptional customer service be provided when there is no one at self-checkout lanes but you? I am not opposed to self-checkout lanes, but let's not confuse them with exceptional customer service. Publix has not initiated self-checkout lanes yet. What they are noted for, among other things...Exceptional Customer Service.

What is the ideal solution? I suggest a couple self-checkout lanes per store is sufficient. But let's not forget that technology does not answer every need in business.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I believe it can enhance customer service in the proper shopping environment. Customers want choice in how they are served and want speed in the checkout. They also want to be rewarded and retailers should consider offering discounts for scanning and bagging their groceries. I have not seen any retailers in my area doing this yet.

As for lost merchandising on impulse sales (such as off candy and magazine racks), the store could easily set up a self-scan in one of the regular checkstands. How much really can be lost with these customers anyway, who want to get out fast and easy?

'pmsmmi'

Two issues are evident. The first is, do customers want self-checkout or faster service? I suspect the latter is the case. How about using technology to provide that? The second issue is that checkers offer an opportunity, if well used, to deepen the relationship with customers and help differentiate a store. So how about good, prompt service as the solution to the ills of mankind?

Roberto Orci, CEO, Acento Advertising

This is a very complex topic that is dependent on many factors, like category, brand, audience, shrinkage, impulse opportunities, ad infinitum. Self-checkout at a supermarket is vastly different than what it would be at a Nordstrom.

The prevailing technology is quite advanced, yet still in an early stage. If RFID ever makes it to the mainstream on products, it can really simplify/ streamline checkout. Mobile devices are a rapidly emerging fork in the road for checkout as well and likely to be the winner in mid and upper-level stores.

Execution is the key to consumer acceptance and is what determines if self-checkout creates exceptional customer service or if it's another bad technology investment.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

Because self-checkout remains a convenient choice for many shoppers, the terminals definitely support great customer service. But adding impulse items to that lane would likely slow the process down, thus supplanting the key motivators driving self-checkout use -- convenience, speed and control -- and undermining any potential customer service gains.

Still, retailers should continue to experiment with various merchandising options to maintain or grow impulse item sales. For instance, adding a kiosk of impulse items near the self-checkout lane may prove useful, or experimenting with the addition of impulse items to other areas of the store. But one thing merchants should avoid is the impulse to add impulse items to self-checkout.

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Tim Henderson, Editor/Writer, Independent

Self-checkout is evolving, driven by a number of technologies. Smartphones, in-store Wi-Fi, in store location monitoring, and mobile payment will change self-checkout as we know it today, and also change the ROI model dramatically.

People want the option to serve themselves sometimes and receive high levels of service at other times, as stated by many of the experts. Offering self checkout facilities enables retailers to focus their limited resource on serving those customers that want and need to be served.

In terms of impulse purchasing, moving to a model where the customer is using their own mobile device to support the shopping journey provides the potential for highly targeted "impulse merchandising" when combined with location sensitivity and CRM data.

Richard Dodd, CEO, BT Expedite

Self-checkout has a valuable role to play in many retail environments. In any shopping population, you'll have a segment of shoppers that wants a self-service experience, and a segment that wants an assisted one. The best experience for both of those segments is to give them what they want!

Often, the same shoppers will want both experiences depending on their mission. Are you buying a lot of produce and bulk items and don't want to enter the item codes? Go to a full service lane where they will do it for you. Need a quick quart of milk (or something to treat an embarrassing medical condition), you'll probably want self-service.

They key is to understand the needs of both types of shoppers and meet them. There is always a balancing act between up-selling and speed of transaction. If the population in the self-checkout line has already expressed a preference for speed of checkout, then you need to be extra sensitive to things which slow it down (like affinity enrollment, promotion redemption, and up-sells).

Just throwing self-service terminals in a store designed for full service is a recipe for failure. My local Safeway is only 4 years old (designed well after self-service became a standard feature in Safeway), yet there is no queue management for the self-service terminals. Customers queue up in one of the product isles, making it impossible to take a cart down the isle or shop the products on those shelves. That's an expensive mistake for the products on those shelves.

Another interesting aspect is loss prevention. We've now seen high profile arrests of fraudsters targeting self-service checkout in numerous chains. That is only likely to get worse as stores move to in-isle self-service checkout.

At the end of the day, self-service definitively has a place. The most successful retailer in the world (Apple) now offers in-aisle self-service checkout in all of its stores.

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Jason Goldberg, VP Commerce Strategy, Razorfish

Self-checkout will eventually evolve into NO checkout, as currently practiced. Rather each item will be paid for (checked out), by means of their smartphone, as the customer moves it from the display into their cart/basket/bag. Stop & Shop has the most advanced practical deployment of this, at least approaching, that I am aware of.

I say "approaching" because Stop & Shop began years ago with a proprietary mobile device, and now with the app on smartphones, and payment was still at the end of the trip. The process will continue to be incremental for them, as well as for the rest of the world, moving slowly along in a direction that it absolutely MUST move -- elimination of "checkout" as we know it.

This is also the required step to make smartphones integral to shopping trips, not techie toys for the fringe.

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Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Adjunct Senior Fellow, Ehrenberg-Bass Institute

The continued debate on self-checkout is very interesting. It is even more interesting that the spin on Albertsons and Big Y's decision is accepted at face value. I'd suggest digging a bit deeper into the real reasons behind their decisions and there might be a different story.

Self-checkout executed well is indeed an enhancement. It offers more lanes open all the time. If staffed by an exceptional assistant, they are great opportunities to excel at customer service. Yes, it is in fact true that there is labor savings. There's no surprise there. Isn't that the intent of technology? Shouldn't good technology enhance the experience? Whether it's people or technology, both are dependent upon execution.

I'm also surprised that it's rarely mentioned that studies continue to show that even if a customer chooses not to use self-checkout, many expect them to be there regardless.

With respect to merchandising, the right choice of lane allows no different opportunity than a standard lane for merchandising. In fact, some self-checkout lanes are shorter than a traditional lane and can support an even larger rack for merchandising. This makes the opportunity even greater.

Poor decisions and execution result in poor results. Self-checkout is no different. The right choice of equipment and execution can deliver large gains in savings and improvements in overall customer satisfaction and customer perception of service.

'Scanner'

As a shopper, I avoid self checkout. When certain segments of retail including grocery and pharmacy started to promote this impersonal way of doing business, cost savings were a sensible rationale.

Looking at the poll results, one can see that most of the contributors here are concerned about customer experience.

In the end, the more the industry moves towards self checkout, the greater the opportunity will be to differentiate with personal service.

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Bill Hanifin, Managing Director, Hanifin Loyalty LLC

Our research shows that the customer experience at the checkout can have a major impact on the overall customer satisfaction with the shopping experience. For most retailers, this suggests giving shoppers the opportunity to complete the transaction as they prefer including a choice of traditional checkers, self checkout, mobile and other technology assistance. It also includes effective merchandising of popular impulse items which, in addition to producing sales, actually add to the shopper experience. The merchandising approach should be designed to complement the type of transaction.

Most importantly, retailers should view the self checkout in the overall context of a technology and customer service strategy. The goal is to help position the retailer versus competition and use high tech and/or high touch to support the desired customer experience.

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Raymond D. Jones, Managing Director, Dechert-Hampe & Co.

Self-checkout is a retail attribute that helps to fulfill the serve the shopper in the way THEY wish to be served. Are retailers that pull self-checkout more concerned with themselves and store performance or what their shopper wants? The shopper wants efficiency, speed, and good deals. Self-checkout may seem crude to the retail expert, but to many shoppers in a hurry -- like my wife -- they love it.

When self-service check-in for airlines first came on the market it was not received very well and considered a waste of money. What do most airlines and travelers think of it now?

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Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

No. Self checkouts are a quick, low basket-count solution. Better customer service would employ more checkers, to create a smaller wait time in line, and increased customer service. More attended check lanes with seasoned checkers speed customers through the check lane process, address individual issues, and often give the consumer that personal service (and thank you) which is the hall mark of great customer service.

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Kai Clarke, President, Kowa Optimed, Inc.

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